Last Thursday, the CPUC released a draft version of the NEM Public Tool, the model that will be used to measure the impacts of different proposals for NEM 2.0. Initial results indicate a major bias against solar. A workshop on March 30 will reveal more information and opportunities for comment.

Solar Water Heating and Natural Gas Prices

At the beginning of this year, natural gas utilities began having to buy allowances in the cap and trade program, but how many allowances they will have to pay for in future years remains to be decided. CALSEIA is advocating that they pay for 100% of the allowances so that natural gas rates better reflect the cost of carbon. In data presented to the CPUC last week, this would raise natural gas rates approximately 11%. The utilities want to pay for only 30% of allowances next year. A decision is due out in June.

MASH Rules Coming

The MASH program administrators will release the new version of the Handbook on March 30 with the rules for the next phase of the program. We expect they will open it up to new reservations in June.

New SGIP Ruling

Last Friday, the CPUC issued a ruling calling for input on how to redesign the rules for the Self-Generation Incentive Program by correlating rebates with greenhouse gas emission reductions. This could benefit energy storage, but there is also a risk that an overly complicated methodology could work against storage. It also asked for information on the round trip efficiency of energy storage. Comments are due on April 17.

Parties filed comments last Monday in response to policy questions issued by the administrative law judge. They did not include full proposals for NEM 2.0, but they gave some indications of where the different parties are headed.

CALSEIA and its solar allies are fully aligned and filed comments jointly. We are pushing for changes to net metering to be as minimal as possible, for the Commission to account for the full benefits of solar energy, and for NEM 2.0 to support the continued growth of the solar market.

Some of the statements from utilities may be helpful, such as a willingness to phase out what they see as subsidies over time rather than turning everything on its head overnight. But on the whole they are clearly seeking to limit the benefits that get counted in credits to solar customers.

SCE and PG&E indicated they want to count reduction of demand from customer usage that is directly offset by on-site generation as a cost to the utilities.

All of the utilities want the CPUC to continue ignoring the benefits of solar that are not embedded in rates, such as job growth, greenhouse gas benefits beyond the cap and trade program, and local health issues.

All of the utilities are pushing for solar-only fees. PG&E and SDG&E said this could take the form of demand charges for solar customers.

All of the utilities want the CPUC to consider eliminating the NEM exemptions from interconnection fees and standby charges.

TURN, the consumer advocate, came out strongly in favor of a Value of Solar Tariff that compensates solar customers according to a very narrow calculation of the benefits to the grid of distributed solar.

Replies to these comments are due next Monday.

NEM Public Tool

Also on the NEM front, the CPUC has scheduled a workshop for next Monday, March 30 at 9:30-12:30, to train people to use the Public Tool. This is the model that will measure the impacts on utilities and the market of different proposals for NEM 2.0. A draft version of the model will be released this week.

Smart Inverters

The Smart Inverter Working Group began Phase 3 of its work on March 13. The draft list of functions to be considered in this phase includes 29 items. Some of these will be much more controversial than earlier items, since they will reduce the power output of solar systems. How to compensate system owners for these grid services will be hotly debated.

A draft of the Phase 2 recommendations on communications protocols was sent to the CPUC for informal review on February 28. After this review, the recommendations will be proposed as changes to Rule 21.

The CPUC has scheduled a workshop for March 30 to teach parties how to use the Public Tool, the model that will be used to measure the impacts of different proposals for NEM 2.0. They promise to release the beta version of the tool before the workshop. This will be our first look at how the Commission is likely to view the numbers on net metering into the future.

The CPUC opened a new rulemaking on the question of whether to increase the percentage mandate in the Renewables Portfolio Standard beyond the current 33% by 2020 requirement. This will also be a high profile debate in the legislature, so the CPUC rulemaking will serve as a backstop in case legislators fail to get the job done.

If you do commercial installations in PG&E territory and haven’t seen the draft Option R tariff, be sure to check it out. The demand charges are much lower than in E-19, and the energy charge differential between peak and off-peak is bigger than in A-10. Optional E-19 customers with maximum demand below 500 kW can also use the tariff.

PG&E issued the proposed details of the tariff a month ago and nobody has protested those details. This likely means the structure will be as proposed, although the numbers will be updated slightly as part of a periodic tweaking of all rates. The tariff takes effect June 1.

At the pre-hearing conference in the CARE docket, where parties discuss what should be on the list of items to be considered in the proceeding, our proposal was not on the draft list. Our statement urges them to include it.

CleanCARE would use money from the CARE subsidy to install solar, giving low-income customers part of their electricity for free rather than reduced rates for all of their electricity. It can provide bigger savings than straight subsidies for the same amount of money.

Low-income advocates and CPUC staff have been supportive of the concept of the proposal, but are nervous about monkeying with the CARE program. We will be working with them to figure out all the details.

Last week in the NEM 2.0 proceeding at the CPUC, the administrative law judge released a list of policy questions that will form the first discussion on the record of what parties want to see in the “successor tariff.” Responses are due on March 16, so everybody will be scrambling over the next two weeks to build the case for their preferred outcomes.

You can bet that utilities will do everything they can to characterize net metering as a subsidy and make the price tag high. Solar allies will demonstrate the fairness of net metering when all benefits are included.

One of the key questions is how to define “sustainable growth,” since AB 327 requires that the successor to the current net metering structure ensures that solar “continues to grow sustainably.” We need to make sure that provision is given full attention.

Cap and Trade Funding

CALSEIA submitted comments on Friday on the inclusion of natural gas utilities in the state’s Cap and Trade Program. Utilities do not want to pay for all of their carbon allowances, yet doing so will send the price signal that was intended by the legislation. Some portion of funds should also be reserved for programs that reduce natural gas consumption through solar water heating and other technologies, rather than giving all of the money to ratepayers in the form of the Climate Credit.

SDG&E TOU Periods

CALSEIA filed its reply brief on Thursday in SDG&E’s rate case in which they are seeking to move the on-peak period later in the day. After testimony, hearings, and briefs, the record is now closed and we await a proposed decision. We are pushing for solar-friendly rate schedules to remain available.

CSI-Thermal Handbook

The CSI-Thermal program administrators issued proposed changes to the Handbook last week to incorporate the CALSEIA petition for modification, which the CPUC granted in full. Changes to the rebate calculator will take more time, but the higher incentive levels are in effect.

We are hearing that it will still be a couple more weeks before we see the beta version of the “NEM Public Tool” that will evaluate different proposals for NEM 2.0. It was originally scheduled to be released in January, but it has been delayed due largely to the challenge of creating a useful model that is user friendly. Defending net metering is the biggest regulatory issue for CALSEIA this year, and the technical side will kick into action when the draft model is released.

We continue to have discussions with CPUC staff and with member companies about interconnection challenges. The utilities are clearly waging a deliberate campaign against meter aggregation by making interconnection painful and expensive. We are collecting documented cases where this is happening with the expectation of filing a complaint.

We filed a statement in the community solar proceeding last week recommending that certain issues be taken up in the next phase of the proceeding. We are pushing for a fairly significant overhaul, including revisiting the compensation structure for the credit that customers receive for their share of a community project. The Commission may be inclined to stick close to the structure they recently created, but we will push to broaden the scope of issues to be considered.

Are your customers on time of use rates? You may want to get them there now in case TOU options become more limited in the future.

TOU rates in San Diego were the question of the week last week. SDG&E has proposed to change the on-peak hours from 11-6 to 2-9, and the deadline for briefs in the rate case was on Thursday.

SDG&E already peaks later in the day than the other IOUs because a higher portion of their customers are residential. The utility is concerned that as the amount of solar on the system increases, net peak demand will continue to migrate later and the difference between afternoon and evening demand will become greater. They want to use TOU rates to encourage customers to use less power in the evening.

The concept isn’t altogether unreasonable, but in their proposal they failed to justify the specific time periods they are proposing and failed to analyze the impacts on other aspects of rate design. Plus, there is the big question of the negative impacts on solar investments, past and future.

In CALSEIA’s brief, we point out that the issue should be put off until the next General Rate Case, which can look at the question more holistically. But we also recommend that if the CPUC allows the change now they should only apply it to some TOU rates and make sure there are solar-friendly TOU rates also available.

SDG&E’s TOU rate for residential solar customers, DR-SES, has become more favorable over time. If you haven’t encouraged customers to go on that rate in the past, you may want to consider doing so now. If the Commission decides to grandfather solar customers already on that rate but close it to new customers, your customers will probably be much happier if they got in before the change.

The CPUC on Friday issued a final guidance on the Distribution Resources Plans that the utilities will file this summer. This is a sleeper portion of AB 327 that could have a big impact. Done poorly, it would result in DG being encouraged only in limited areas where it has the greatest benefit to the grid. Done well, it will require the utilities to do what it takes to integrate a much higher percentage of distributed renewables. CALSEIA has been participating in a grid modernization working group that aims to make this proceeding a success.

Other than that, activity was light at the CPUC this week, which gave us the opportunity to plan out some of our work in various proceedings. Here is a mini overview of issues at hand.

SDG&E Rate Case: Should SDG&E be allowed to change the times of the On-Peak period for all TOU rate schedules to 2-9 pm in the summer and 5-9 pm in the winter? Brief is due February 12.

Community Solar: We got a lousy decision from the CPUC setting up a program with valuation that won’t work to get projects built, but they have already started the process of revisiting some of the rules. Opening statements are due February 16.

Solar Water Heating: Natural gas utilities are participating in the Cap and Trade Program as of the first of this year, but no decisions have been made about what to do with the proceeds from auctioning allowances. A portion should certainly go to leveling the playing field for solar water heating. Comments are due February 27.

SGIP: The CPUC is finalizing a guidance clarifying which energy storage systems are eligible for SGIP rebates. Systems will need to have the capability of being discharged in response to grid shortage events, and customers will either need to be on TOU rates or verify that they are discharging regularly rather than only being used for backup. Comments are due February 9.

NEM 2.0: We have spend a lot of time refining projections for when SDG&E will meet the 5% cap for the expiration of the current net metering structure. Depending on your assumptions for the future installation rate, it could be anywhere from January to August 2016. See this graph.

CPUC staff say that the beta version of the “NEM Public Tool” will be available in the next week or two. This will offer the biggest insight yet into our chances for preserving true net metering.

Smart Inverters: A new draft of the Phase 2 recommendations of the Smart Inverter Working Group is being circulated. This will establish the communications protocols for utilities and aggregators to be able to interact remotely with inverters.

Last week’s voting meeting of the CPUC was an eventful one for solar. The Commission acted on our petition to raise incentive levels for solar water heating systems, approved a new MASH program, and created a community solar program.

Solar Water Heating

We must have been good boys and girls, because the Commission gave us everything we asked for. The decision responding to our petition to raise incentive levels in the CSI-Thermal program granted our petition in full. Higher incentives are retroactive to last July. Money is shifted to the multifamily program. The incentive cap for large projects was increased to $800,000. And more. Time to get to work installing systems.

MASH/SASH

AB 217 of 2013 extended the Multifamily Affordable Solar Housing and Single-Family Affordable Solar Homes programs, and now the Commission has issued a decision implementing that extension. Many details of the program were under consideration, including how to structure the incentives and how to boost energy efficiency and job training requirements. In the end, the Commission made decisions we think are entirely reasonable. Incentives in MASH will be $1.10/Watt for common area load and $1.80/Watt for tenant load.

Community Solar

We were never expecting much out of SB 43, and not much is what we got. The Commission issued a decision last Thursday creating community solar programs, but it pegged the compensation to the ReMAT feed-in tariff price and will not give customers fair credit for their stake in a solar project. Hopefully some companies will be able to make it work, but it’s far short of what would be needed to make community solar widely available. At least the utilities will establish the mechanisms for community-led projects, and there will be a process for refining the rules that could make them more workable down the line.

Other Issues

CALSEIA filed its final brief in the residential rates case last Monday. A decision is expected in April to restructure residential rates for all three IOUs.

CALSEIA Weekly Policy Review – January 26, 2015

NEM 2.0

The CPUC inched forward in the NEM 2.0 proceeding last week by issuing a memo defining the scope and timeline. There were no big surprises, although they relaxed the timeline for development of the Public Tool. This is the model that will measure how much revenue utilities lose when people go solar under different proposals for net metering structure. The Commission now says the beta version of the Public Tool will be released in “First quarter 2015” rather than “late January,” with the final version released in the second quarter rather than the previous target of March. They also said they will seek “comments on policy issues” this quarter, which may be the first time that parties put their positions officially on the table.

Meanwhile, concern has been growing that SDG&E could meet its 5% cap for NEM 1.0 before new rules are in place. The chart below is based on the IOU monthly reports of progress toward the cap. It appears that SCE will offer NEM 1.0 until July 1, 2017, the deadline for NEM 2.0 implementation according to AB 327. PGE will at least be close. But SDG&E will clearly meet its cap before the deadline. Assuming the installation rate stays that same as the average over the past four months, they will meet the cap in April 2016. If the installation pace increases, as it normally does year over year, it will be sooner. CALSEIA is exploring policy options for dealing with this.

Solar Water Heating

At long last, the Commission is scheduled to grant CALSEIA’s petition to increase incentive levels in the CSI-Thermal program. It is on the agenda for the CPUC voting meeting this Thursday. We proposed incentives of $20.19 per therm for multifamily housing, $24.89 per therm for low-income multifamily housing, and $29.85 for single family homes. We are hoping to see a surge in activity as companies move forward with projects that have been on the drawing boards.

Other Issues

Look for CALSEIA’s final brief in the residential rates case on Monday, along with final comments on the proposed decision on community solar submitted jointly with solar allies.

At this week’s CPUC voting meeting, the MASH final decision is back on the agenda. We expect the community solar decision to be removed from the agenda until the February 12 meeting.

CALSEIA Weekly Policy Review – January 19, 2015

MASH

The decision on resuming the MASH program was on the agenda at last week’s CPUC voting meeting, but it was held until the next meeting on January 29. This was expected and is good, since a lot of tricky issues were still up in the air. This includes whether a higher level of job training and energy efficiency requirements should be applied to every installation. It also includes whether landlords should be limited from readjusting rents by the full amount that tenant bills go down after solar is installed. The Commission is likely to require that landlords can garner some of the savings to help pay for the system but some of the savings must be left with tenants.

Best case scenario of a timeline for MASH to get rolling again is late April. It could be June.

Community Solar

The CPUC surprised solar advocates on December 30th by issuing a proposed decision in the SB 43 proceeding that includes both a green tariff program (where customers pay a higher rate for 100% green power, but the projects are driven by utilities) and community renewables (where developers can sign up subscribers to install local projects). The Commission had previously said they were going to do the first of those right away and the true community solar portion later.

By including both at this time, they are clearly trying to get a community solar program set up in time to take advantage of the ITC. Unfortunately, there are serious flaws in their proposal that may make it impossible to actually finance and build projects. They are overly optimistic on installation costs, so the numbers just don’t add up. And they only allow customers to subscribe for a year at a time. It would be hard to convince a lender that the revenue will be steady when people have to renew every year.

CALSEIA will be working together with solar allies between now and the January 29 meeting to get these rules improved. Our official comments on the proposed decision will be filed on January 20.

Residential Rates

The other big thing taking staff time this week is preparing our final statement in the residential rates case, the reply brief, which is due on January 26. We will oppose any new fixed charges, but we expect some flattening of the rate tiers to happen and are seeking a fair middle ground. Flattened tiers will be phased in over the next 4-6 years. For more, see our opening brief.

Flatter Rate Design Threatens Solar

By: Adam Gerza

Within the California solar industry there is a general understanding that the project economics of going solar will not be as strong for homeowners as a result of looming changes to residential rates caused by AB 327. But does a 40 percent reduction in energy savings seem too extreme? I ran some numbers and want to share them with you.

Background

Residential electric rates in California have had an “increasing block” structure for the past twelve years. The more you use, the higher your rate. This type of rate design is simple and well understood. It has incentivized customers to use less electricity from the grid, through conservation, energy efficiency retrofits or by generating their own power. There is indisputable evidence that homeowners have responded to this pricing signal: California is a leading state in both energy efficiency and distributed generation solar.

In 2001 rate caps were established on the lower usage tiers, which forced the utilities to levy the majority of their revenue increases onto the higher tiers. Over the years this has led to an increasing differential between the top and bottom rates. The utilities have vociferously argued that this has created an unfair cross-subsidy, whereby high usage customers are paying more than their fair share and low usage customers are not paying enough. In order to remedy this situation, the utilities were able to pass legislation in Sacramento last year to reform electric rates and remove the rate caps on the lower tiers. That legislation, AB 327, allowed the California Public Utilities Commission (CPUC) to redesign residential rates.

The CPUC must strike the appropriate balance of maintaining the price signal for energy efficiency and self-generation while easing rates for high-usage customers. There is a general acceptance that the tier structure will get flatter, but there is disagreement over how far that should go.

Utility Proposals

Not surprisingly, the proposals that the utilities submitted to the Commission were incredibly aggressive in their attempt to flatten the tiers. All three IOUs submitted virtually identical proposals, featuring three main elements: (1) 2-tier structure, (2) 20% delta between the tiers, and (3) $10 per month fixed charge.

How would these proposed changes affect solar customers?

When I created a model to run these scenarios I expected to see an erosion in solar value, but I was shocked at the extent of that erosion.

Average Monthly Usage (kWh)

Full Offset System

75% kWh Offset System

50% kWh Offset System

PG&E

750

-12%

-19%

-30%

1000

-22%

-30%

-38%

1250

-26%

-34%

-40%

1500

-29%

-36%

-40%

SCE

750

0%

-7%

-17%

1000

-10%

-18%

-26%

1250

-15%

-22%

-29%

1500

-18%

-25%

-30%

SDG&E

750

-14%

-20%

-29%

1000

-21%

-28%

-35%

1250

-25%

-31%

-36%

1500

-28%

-33%

-36%

Existing high-usage solar customers stand to lose the most as a result of flatter rates. This is quite relevant, because high-usage customers make up a disproportionate proportion of the existing solar homeowners in the state. The reason is simple: large energy consuming homes have the highest average cost of energy, making them the best candidates for solar. What’s more, many of these high-usage solar homeowners installed a partial offset (or ‘tier-shaver’) system, which optimized the best possible payback by only eliminating the expensive usage. These very customers stand to lose the most as a result of flatter rates.

The rates the IOUs are proposing would lead to significant reductions in savings, which does not seem fair for homeowners who made investments in solar or energy efficiency (EE) retrofits. For customers who cash purchased a solar system or EE upgrade, reduced energy savings would stretch out their payback period and reduce their return-on-investment. For homeowners who third-party-financed their solar system, significantly flatter rates could cause their PPA or lease agreement to go “upside-down,” meaning they would be stuck paying out more than they are saving.

What’s Next

The IOU rate change proposals should not be taken as a given. It’s normal for utilities to ask for twice as much they expect to get. Nevertheless, solar installers should be aware of how damaging these proposals would be. Parties to the proceeding will submit testimony to the CPUC in September, with hearings scheduled for November and a final decision expected in March 2015.

The CPUC has scheduled a series of Public Participation Hearings in September and October. It is essential that the California solar community come out to speak on this important issue. The Commission needs to take a balanced approach in restructuring rates, ensuring they maintain a price signal for energy efficiency and self-generation, and also not destroy the economics of homeowners who have already made green investments.

Adam Gerza is the Director of Government Affairs for Sullivan Solar Power and a CALSEIA elected board member.

Yesterday, net metering aggregation finally went live for Southern California Edison and San Diego Gas & Electric. You can now install solar systems to cover multiple meters on adjacent properties owned by one customer.Thanks are due to the California Public Utilities Commission for standing firm on the fees for aggregation. SCE and SDG&E proposed high fees that would have prevented many good projects from going forward. CALSEIA protested those fees and the CPUC agreed. The Commission passed a resolution over the objection of the utilities.The utilities will charge a setup fee of $25 per account in an aggregation arrangement, not to exceed $500, and an ongoing billing fee of $5 per account per month. These fees are substantial but are less than what the utilities had proposed. They will be evaluated in one year and may change on a going forward basis.Currently installed projects are able to create aggregation arrangements for eligible properties and switch to the tariff. The different accounts in an aggregation arrangement can be on different rates, and each gets a generation credit proportional to its load. Many more details are in the advice letters of SCE and SDG&E that implement the NEMA tariff.PG&E’s NEMA tariff has been in place since February, and the report from most contractors is that projects are getting set up smoothly. Please let us know what your experiences are with the other utilities.Let’s get to work! I’ll look forward to hearing about new installations.